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U.S. losing drug-research jobs to other countries

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The U.S. risks losing thousands of research jobs as countries led by Singapore, Ireland and South Africa boost incentives to woo drugmakers, said John Castellani, head of a pharmaceutical industry lobbying group.

Those countries are outpacing the U.S. with tax incentives, increases in government research spending and efforts to train scientists, according to a study released Thursday by the Pharmaceutical Research and Manufacturers of America. That has many U.S. companies considering shifting their investment overseas, according to the lobbying group that represents most of the largest drugmakers.

Indianapolis-based Eli Lilly and Co., for example, plans to invest $420 million in a new pharmaceutical plant in Ireland. London-based GlaxoSmithKline Plc opened a $600 million vaccine plant in Singapore in 2009. Johnson & Johnson, based in New Brunswick, N.J., is looking to buy Chinese companies with treatments for mental illness and cancer, the company’s China unit head said this week.

The pharmaceutical industry spends more on research than any other industry in the U.S. and employs 650,000 people, according to PhRMA. Drugmakers have been under pressure to cut costs as they brace to lose $120 billion in sales to generic competition by 2015 in the U.S. and Europe, according to IMS Health Inc. Drugmakers are looking outside the U.S. for growth and savings.

“It is getting very, very competitive in the world as everyone tries to attract this business,” Castellani said. “These are the best jobs you can create in an economy. These are the highest-multiplier, best-paid workers, the ones that drive the biggest bang for your investment dollar, and the rest of the world knows that.”

Castellani said PhRMA will lobby Congress to make the research-and-development tax credit permanent and fight any efforts to limit the incentive, which enables tax reductions made on the basis of how much they spend on developing new products. He is also pushing to limit cuts to drug spending in Medicare and Medicaid, the U.S. health programs for the elderly, disabled and poor. A $20 billion drop in revenue for drugmakers could lead to 260,000 job cuts, PhRMA said.

Efforts by the U.S. to keep companies may have little benefit as most of the growth in the pharmaceutical sector will be in emerging markets, said Christopher-Paul Milne, associate director for the Tufts Center for the Study of Drug Development. Spending on drugs in emerging markets, such as China, India and Brazil, is set to double in the next five years to as much as $315 billion—about the size of the U.S. market, according to IMS, a Danbury, Conn.-based company that analyzes health trends.

“It is a global industry and has been and it is going to continue to further globalize,” Milne said. “It has spread out from being U.S.-centric to more U.S., Europe and Japan, to now being worldwide.”

To lure companies, Singapore’s government has been pushing to recruit and train researchers, and has one of the highest rates in the world with about 6,000 researchers for every 1 million citizens, according to the PhRMA study. It also offers a tax deduction of 150 percent for research expenses. As a result, pharmaceutical exports have increased 274 percent since 2000.

Ireland has created programs to fund research, such as $4.6 billion in basic research grants, and offers a 25-percent research tax credit and one of the lowest corporate tax rates of 12.5 percent, according to the report.

Castellani is going to China this week to meet with Chinese companies that are trying to attract foreign investment to build a biotech and pharmaceutical sector there.

“As we go around the world, we are seeing countries develop very aggressive innovation strategies,” Castellani said. “We don’t see the U.S. doing the same thing.”

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  • Taxes have actually reduced.
    Taxes have gone up only in your mind because that is what you wish to believe. The truth is taxes have gone lower than during the Bush Presidency. There was an attempt to raise taxes on the rich but that never succeeded.

    Businesses will move to any country as long as there is profit to be made even if the taxes are higher. If a $ 1 product is sold in a county with 30 % taxes and there are only 100,000 customers, then the revenue is $ 70.000. If the same product is sold in a country with 50 % taxes and 200,000 are sold , then the revenue is $ 100,000. $ 30,000 more than the country with lower tax.
  • Thanks Obama
    Thanks Obama and your merry henchmen for making sure that big business is not welcome in this country. Support for the unions and the unacceptable taxation at the highest rates in history with only promises of more inreases has forces businesses to go places that they feel welcome. Vote NOBAMA 2012. Save our country

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